King Rat (gkr) wrote,
King Rat
gkr

More work stuff

Today, InterActiveCorp purchased Hotwire and merged it into Expedia, along with Hotels.com, forming IAC Travel. Although officially this is an IAC purchase, basically this means that Expedia is getting even bigger. Basically, Expedia goes from being barely the largest online seller of travel earlier this year to being by far the largest online seller of travel and probably getting close to being #3 or #2 in North America.

In some respects this is good. My employer is getting bigger. We won't be having lay-offs. More likely our former competitors will. It also means we become even more of the 800 lb. gorilla in the industry. Because we sell so much travel, other companies will be more likely to work with us on our terms.

In other respects though, I am worried. First, I've seen a lot of companies get too big to be able to act like a small and hungry company. Second, and more importantly, one thing we've learned from the late 90s boom is that growth through acquisition is usually not the best strategy. Companies that employ the technique are often using this to cover up serious problems in their businesses. At some point, there aren't any more competitors to buy, and the whole thing comes unraveled. I don't think we have the same kinds of holes in our business like some of these other companies like WorldCom did, but the only insight I have into our financials is what is publicly released. I do not want to become another AOL Time Warner, Tyco, WorldCom or Global Crossing. Those were other companies that grew through acquisition to cover up lack of revenue growth. When all was said and done, these companies had too much unamortized goodwill sitting on their books and the companies didn't have enough growth to cover that goodwill deficit. (If the term goodwill as used in accounting is confusing, ask me and I'll explain it.)

I hope to god that if we do have such problems (and I don't know that we do), they don't become apparent for at least 2 more years, at which point my initial stock option grant will be fully vested and I can take the money and run if things look too scary. I hate to be one of those people who would do such a thing. No wait, I don't. I've warned everyone right here, so I've done my duty by warning everyone.

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